Trying Hard not to go Broke

A few lessons I've learnt from investing as a 20 something year old Nigerian.

Investing is something I stumbled upon by chance, almost a decade ago. In all honesty, I was looking for a way to make money – more money so that I can decide I won’t work again if I don’t want to. A goal I still have and tirelessly pursing, but with much more nuance than I started.

One thing I’ve never shied away from was that I want to be wealthy, and for the longest time I used to have an idea of what wealth meant, now, I am not sure.

When I started out, I was mostly focused on “passive income”. This led me to stocks as an asset class, and I focused on dividend investing.

Passive income is a money stream that requires little or no continuous effort.

Dividend investing is an investing strategy where one buys stocks from publicly traded companies that offer regular dividend payouts.

The plan was simple; buy stocks, get paid dividend and use the dividend to buy more and get even more dividend. Do this enough times such that my expenses can be covered by the dividend I receive. Easy-peasy, or so I thought.

A stock, also known as equity/share, is a security that represents the ownership (of a fraction) of a company.

It turns out that requires time, –a long time if we are keeping it real– and a lot of patience. Something a younger me did not have enough of. I was focused on this strategy until I heard the Federal Government of Nigeria offered what is called a “Sukuk bond”.

A bond is an investment product where individuals lend money to a government or company at a certain interest rate for an amount of time. The entity repays individuals with interest in addition to the initial money borrowed.

As a Muslim, I can’t be invested in interest bearing assets –bonds, commercial papers etc, and as such bonds were out of the picture. However, Sukuk bonds (Islamic bond or “Sharia-compliant” bond) are an alternative to bonds, and I had the opportunity to buy my first one.

Sukuk bonds represent a portion of ownership in assets, and the profit generated from these assets are distributed pro rata. The main difference between conventional bonds and sukuk is that sukuk is not a debt instrument, rather an asset backed instrument.

With that as my introduction into the fixed income market, I began to take note of returns.

A coupon of 15.743% was decent, but in hindsight it was luck.

From there on, I took interest in the stock market —Nigerian, and the US— and spent hours on Investopedia and a host of other websites.

Fast-forward to today, I know there is still a lot of gap in my knowledge, but I think I’ve made progress.

My portfolio today is a mix of Nigerian, and US stocks, fixed income, and Mutual funds.

A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, etc.

What I have learnt So Far

Hindsight, they say, is 20/20. These are some things I am lucky to have learnt —mostly still learning —over the years as a baby investor. Please, as with all advice, take with a pinch of salt and note that your mileage may vary.

The Importance of Knowledge

The one thing that affects every facet of life is learning (knowledge/ information, whatever you call it), and investing is not spared from that too.

It is important to learn, and keep learning if one is to get better at investing, and any other thing. While I learnt on my own, there were aspects of investing I had to be taught.

Experience too matters, however, it should not be overestimated. There are things you learn only in practice, and others you have to learn in theory first. Investing blindly–without knowledge, is the fastest way to burn your money.

It's good to learn from your mistakes. It's better to learn from other people's mistakes.

Learn from the mistakes of others. You can never live long enough to make them all yourself.

Have a goal in mind

One thing that I did not have earlier on was a goal or a benchmark for investing. I was doing it because it was fun. I was investing based on vibes – I still do sometimes. The difference now is that I know when I’m vibe investing, and I am clear about it.

Without a goal in mind, it is difficult to continue, especially when there is a market downturn.

For me, it was more of a hobby than an actual goal I was pursuing, and I derived pleasure from doing it.

I’ve learnt that without a goal, or a benchmark, there is no way for me to judge myself. A goal can also be as simple as to why you are investing.

Always begin with WHY.

Slow and Steady

I’ve grown from the time I started investing, and one thing I’ve come to appreciate is time. Everything takes time. Yes, technology has made everything faster and nearly instantaneous. Crypto has also given us the impression that we can get rich fast.

And as much as it will be nice to get rich fast, things that are built to last take time. In the wise words of Buffet, “You can't produce a baby in one month by getting nine women pregnant.”

Some things just take time. The people you and I look up to today did not start today, they have been in the grind for a while– usually a decade or thereabout.

Trust the process, take your learnings and become better.

Yes, and there will be exceptions to the rule, but on average it takes a while before you hit gold.

Let’s consider compounding, it starts really insignificant, a fraction you can ignore, but with time, it becomes so significant that you can’t ignore.

Anything that compounds is something you worth paying attention. Not just money, but habits and relationships– both positively and otherwise.

Your Path is Different

Every one has their desires, wishes, and fears. The life you live informs our relationship with money and by extension how you invest.

Your situation is different form the next person, and as such it will be foolish to imitate or worse compare yourself with another person.

While the general principles hold true, the proof is usually in the pudding. YMMV

Even if your start point is the same, you are running your own race, and not other people’s. Your course is different, and you aren’t in a competition.

So, it is important to avoid peer pressure, keeping up with the Joneses.

Comparison is the thief of joy.

Invest in Yourself

There is nothing to add on this other than this post I’ve written earlier.

You are your greatest asset, so always bet on yourself.

Thank you for reading, and I hope you find this helpful.

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See you soon.

Bye